1
Exhibit 2.5
AGREEMENT
THIS AGREEMENT (this "Agreement") is entered into by and
between MODERN WINDOW CORPORATION, a Michigan corporation ("Seller"), XXXXXX X.
XXXXXX, XXXXXX X. XXXXX, AND XXXXXXX X. XXXXX, its Shareholders (hereinafter
collectively referred to as "Shareholders" or "Owners") and MODERN WINDOW
ACQUISITION CORP., a Delaware corporation, or its designee ("Buyer" or "MWAC").
RECITALS
A. Seller is engaged in the manufacture and sale of window
products at its facilities located in Oak Park, Michigan (the "Purchased
Business").
B. Buyer desires to purchase from Seller and its Owners, and
Seller and its Owners desire to sell to Buyer, substantially all of the assets
owned by Seller and used in the Purchased Business.
C. The parties hereto recognize that this Agreement and the
transactions contemplated herein are to be consummated at the time of the
payment of the Purchase Price detailed in Section 2.01 below. The parties hereto
also recognize that a portion of the Purchase Price described in Section 2.01(a)
provides Buyer with three alternative payment options. The parties hereto
recognize that Buyer, in its sole discretion, may exercise any of these three
payment options in Section 2.01(a), which payment options include:
(1) proceeding with the transactions contemplated by this
Agreement by paying the Cash Purchase Price detailed in
Section 2.01(a)(i), which Cash Purchase Price is to be paid
with funds to be received by Buyer from an offering of
securities of American Architectural Products Corporation, a
Delaware corporation ("AAPC") (hereinafter "Offering"); or
(2) proceeding with the transactions contemplated by this
Agreement by paying the Cash Purchase Price detailed in
Section 2.01(a)(ii) which Cash Purchase Price is to be paid
with funds received by Buyer, if at all, from financing
through Comerica Bank, in accordance with Buyer's current
commitment from Comerica Bank;
(3) or proceeding with the transactions contemplated by this
Agreement as an acquisition by the Buyer, in exchange for
shares of common stock of AAPC (hereinafter "Exchange of
Assets for Stock"), as described in Section 2.01(a)(iii) and
Section 2.02.
2
The parties hereto recognize that whether the consideration for the transactions
contemplated by this Agreement includes payment of a Cash Purchase Price as
described in Section 2.01(a)(i) or (ii) or an Exchange of Assets for Stock, as
described in Section 2.01(a)(iii) and Section 2.02, that any financing required
to satisfy the Purchase Price described in Section 2.01 to be received from
Comerica Bank shall be in accordance with Buyer's current commitment with
Comerica Bank for any such financing.
PROVISIONS
NOW, THEREFORE, in consideration of the above Recitals and the
provisions contained in this Agreement, Seller, its Owners, and Buyer agree as
follows:
ARTICLE I
SALE OF ASSETS
SECTION 1.01. SALE OF ASSETS. Pursuant to the provisions set
forth in this Agreement, at the Closing (as defined in Section 3.01 of this
Agreement) Seller shall sell, convey, transfer, assign and deliver to Buyer, and
Buyer shall purchase and acquire from Seller, substantially all of the
properties of the Seller, all of the assets, properties and rights (other than
the Excluded Assets which are defined below in Section 1.02 of this Agreement)
owned by Seller and used or held for use solely in the operation of the
Purchased Business of every kind, character and description, whether tangible,
intangible, personal or mixed, and wheresoever located, whether carried on the
books of Seller or not carried on the books of Seller, due to expense, full
depreciation or otherwise (the "Purchased Assets") including, but not limited
to:
(a) all rights, title and interest in, to and under any
owned real property (the "Owned Real Property") listed in
Schedule 4.23 of the schedules attached to or accompanying this
Agreement and any supplement to this Agreement (the "Disclosure
Schedules");
(b) all machinery and equipment, supplies, spare parts,
tools, jigs, patterns, trade fixtures, dies, molds, vehicles
(whether titled or untitled), furniture, designs and drawings
(the "Equipment");
(c) all cash and cash equivalents, as well as accounts and
notes receivable;
(d) all inventory, raw materials, components,
work-in-process, finished goods, service parts and supplies,
packaging materials and other similar items (whether new or used)
(the "Inventory");
(e) all right, title and interest in, to and under all
leases of tools, furniture, machinery, supplies, vehicles,
equipment and other items of personal property listed in Schedule
4.06 of the Disclosure Schedules; provided, however, that to the
extent the assignment of any such lease or any claim or right or
any benefit arising under or resulting from such lease(s) shall
require the consent of
2
3
another party, this Agreement shall not constitute an assignment
of such lease(s) if an attempted assignment would constitute a
breach of such lease(s) and, in lieu of such consent, Seller
shall cooperate with Buyer in any reasonable arrangement designed
to provide Buyer the benefits under, or any claim or right
arising under such lease(s) (the "Third Party Leases");
(f) all rights in, to and under all contracts, agreements,
purchase orders, customer orders and work orders listed in
Schedule 4.10 of the Disclosure Schedules; provided, however,
that to the extent the assignment of, or any claim or right or
any benefit arising under or resulting from, any such contract,
agreement, purchase order, customer order or work order shall
require the consent or approval of another party to such
contract, agreement, purchase order, customer order or work
order, this Agreement shall not constitute an assignment, if an
attempted assignment would constitute a breach of such contract,
agreement, purchase order, customer order or work order and, in
lieu of such consent, Seller shall cooperate with Buyer in any
reasonable arrangement designed to provide Buyer with the
benefits under such contract, agreement, purchase order, customer
order or work order, or any claim or right arising thereunder;
(g) all prepaid expenses, deposits and other similar items,
other than prepaid expenses, deposits and other similar items
relating to the Excluded Assets (as defined in Section 1.02 of
this Agreement);
(h) to the extent legally assignable, all franchises,
licenses, permits, certificates, approvals and other governmental
authorizations necessary to own or lease and operate the
Purchased Assets and to conduct the Purchased Business as it has
been conducted by Seller;
(i) all of Seller's right, title, goodwill, and interest in
the name "Modern Window Corporation," "Modern Window," or any
other trade names, trademarks, trademark applications, service
marks, service xxxx applications, copyrights, copyright
applications, patents, patent applications, inventions, trade
secrets, know-how, business plans and strategies, proprietary
processes and formulae, data bases, telephone numbers and all
other proprietary technical information, whether patentable or
unpatentable, related to the products, services or operations of
the Purchased Business as presently conducted;
(j) all books and records including, but not limited to,
property records, production records, engineering records,
environmental compliance records, purchase and sales records,
credit data, personnel and payroll records, accounting records,
customer lists, customer records and information, supplier lists,
parts lists, manuals, correspondence, files and any similar
items;
(k) all computer programs and a copy of the source code and
object code of all such programs, together with all additions,
modifications, updates and enhancements thereto; all design
specifications including, but not limited to, program
descriptions, system flow charts, file layouts, report layouts,
screen
3
4
layouts and all other computer program documentation, all user's
manuals, training manuals, sales literature, and other system and
operations documentation relating to such computer programs;
(l) all rights, claims and choses in action against third
parties including, but not limited to, all rights against
suppliers under warranties covering any of the Inventory or
Equipment, as well as the benefit or proceeds of any of Seller's
insurance policies in regard to claims made or anticipated prior
to Closing;
(m) all stationery, forms, labels, shipping materials,
brochures, art work, photographs, advertising materials, and any
similar items;
(n) all other tangible and intangible assets of Seller
relating solely to the Purchased Business, whether or not carried
at value or listed on the books and records of Seller, and
whether or not in the possession of Seller or others;
(o) all of Seller's right, title, and interest in the stock
of a corporation known as Team Pros America Corporation, which
interest is specifically identified on Schedule 1.01(p) of the
Disclosure Schedules.
Notwithstanding the foregoing, the Purchased Assets shall
not include the Excluded Assets.
SECTION 1.02. EXCLUDED ASSETS. Seller shall not sell or deliver
to Buyer, and Buyer shall not purchase or acquire, the following assets owned by
Seller (the "Excluded Assets"):
(a) the issued and outstanding stock of Seller and the
minute books and stock records of Seller;
(b) Seller's insurance policies; and
(c) all claims and rights to deposits and prepaid expenses
relating to any of the other Excluded Assets.
SECTION 1.03. EXCLUDED AND ASSUMED OBLIGATIONS OR LIABILITIES.
Except for the Assumed Obligations as defined below, Buyer shall not assume and
shall not be responsible for any other obligation or liability of Seller or
shareholders, direct or indirect, known or unknown, xxxxxx or inchoate, absolute
or contingent, including specifically any responsibility for reporting of and/or
payment of Seller's and/or shareholders' obligations or liabilities to any
taxing authority (accordingly, after Closing, Seller shall continue to be
responsible for completion and filing of any tax return informational or
otherwise, in regard to Seller and/or its shareholders' obligations or
liabilities to any taxing authority); liabilities to Seller's principals, owners
or shareholders or entities in which such principals, owners, or shareholders
have an ownership or beneficial interest (excluding Doyco, Inc., and National
Human Resources Committee, Inc.) for any accrued consulting services and/or
notes or obligations payable;
4
5
Seller's and shareholders' obligations pursuant to any Waiver and Consent
Agreement between Team Pros America Corporation and its stockholders except as
set forth below (the "Excluded Liabilities").
Buyer shall assume and agree to pay or perform only the
obligations and liabilities of Seller expressly set forth below (the "Assumed
Obligations").
The Assumed Obligations are:
(a) the Current Liabilities of Seller. For purposes of this
Agreement, the "Current Liabilities" shall mean the obligations
and liabilities of Seller for accrued expenses and accounts
payable of Seller related solely to the operation of the
purchased business (other than liabilities for income,
withholding, and franchise taxes), each as determined under GAAP
and which are identified on the October 31, 1997, balance sheet,
as well as those liabilities or obligations incurred since
October 31, 1997, in the ordinary and normal course of Seller's
business and as may be listed on Schedule 1.03(a) of the
Disclosure Schedules; and
(b) the obligations or liabilities of Seller in, to and
under the leases, contracts, agreements, purchase orders,
customer orders and work orders included in the Purchased Assets
pursuant to Section 1.01 of this Agreement; and
(c) the obligation or liability of Seller in, to, and under
a certain demand note for a FIFTY-SIX THOUSAND DOLLAR ($56,000)
loan by Doyco, Inc., Pension Plan (copies of the note are
attached to this Agreement as Schedule 1.03(c) of the Disclosure
Schedules); and
(d) the obligation or liability of Seller's existing three
(3) principals on approximately ONE HUNDRED THOUSAND DOLLAR
($100,000) working capital loan payable to American Commercial
Holdings, Inc., and a SIXTY-FIVE THOUSAND DOLLAR ($65,000)
working capital loan payable to American Architectural Products
Corporation (copies of the notes representing this working
capital loan shall be attached to this Agreement as Schedule
1.03(d) of the Disclosure Schedules); and
(e) the obligation or liability of Seller or shareholders
for all of Seller's real or personal property taxes payable to
the Oakland County, Michigan, Treasurer, which encumber the Owned
Real Property or any of the Purchased Assets.
(f) the debt obligation of Seller and shareholders of
approximately ONE MILLION THREE HUNDRED FIFTEEN THOUSAND SEVEN
HUNDRED NINETY-NINE DOLLARS SEVENTY-THREE CENTS ($1,315,799.73),
as of September 29, 1997, to the National Bank of Detroit, which
amount shall be paid to the lender at Closing by the Buyer.
(Copies of the payoff letter of National Bank of Detroit has been
attached to this Agreement as
5
6
Schedule 1.03(f) of the Disclosure Schedules, which shall be
updated at Closing, subject to review and acceptance by Buyer.)
SECTION 1.04. TRANSFER OF TITLE TO THE PURCHASED ASSETS. The
sale, assignment, conveyance, transfer and delivery by Seller of the Purchased
Assets shall be made at the Closing by such deeds, bills of sale, assignments,
licenses, endorsements and other appropriate instruments of transfer as shall be
necessary to vest in Buyer, as of the Closing Date, good and marketable title to
the Purchased Assets, free and clear of any liens, charges and encumbrances,
except for the Assumed Obligations.
ARTICLE II
PURCHASE PRICE
SECTION 2.01. THE PURCHASE PRICE. Consideration (the "Purchase
Price") for the purchase of the Purchased Assets and the Purchased Business by
the Buyer, shall be:
(a) At the sole discretion and option of Buyer,
(i) Payment of Eight Hundred Thousand Dollars
($800,000) "Cash Purchase Price") to be paid with funds
received by Buyer from the Offering, provided, however, that
Two Hundred Thousand Dollars ($200,000) of the cash from the
payment to be made by Buyer shall be escrowed as provided in
Section 7.07 and Section 9.07, below. Payment of any Cash
Purchase Price pursuant to this paragraph shall be made not
later than five (5) business days after Buyer receives funds
from the Offering; or
(ii) Payment of the Cash Purchase Price with funds
received, if at all, from financing through Comerica Bank in
accordance with Buyer's current commitment with Comerica
Bank, provided, however, that Two Hundred Thousand Dollars
($200,000) of the cash from the payment to be made by Buyer
shall be escrowed as provided in Section 7.07 and Section
9.07, below. Payment of any Cash Purchase Price pursuant to
this paragraph shall be made not later than five (5)
business days after Buyer receives funding, if at all, from
Comerica Bank; or
(iii) transfer and delivery by Buyer of Ninety-Two
Thousand Three Hundred Eight (92,308) shares of common stock
of AAPC, subject to adjustment pursuant to Section 2.02, if
applicable; and
(1) the transfer and delivery by Buyer of Thirty
Thousand Seven Hundred Seventy (30,770) shares of common
stock of AAPC subject to a certain Put Option Agreement
(said shares shall not be subject to any adjustment pursuant
to Section 2.02);
6
7
(b) Transfer and delivery by Buyer of a certain option
agreement to Seller permitting Seller or its shareholders to
purchase up to Forty Thousand (40,000) shares of common stock of
AAPC for a period of eighteen (18) months at an exercise price of
SIX DOLLARS FIFTY CENTS ($6.50) per share (the "Option
Agreement") subject to the terms of the Option Agreement; and
(c) An assumption by Buyer of the Assumed Obligations
described in Section 1.03 above.
SECTION 2.02. CONTINGENT ADJUSTMENT TO THE PURCHASE PRICE. If the
average closing price of common stock of AAPC (hereinafter "Share") as reported
at closing of trades made on the NASDAQ Bulletin Board (hereinafter "Average
Weighted Share Value") for the twenty (20) trading dates commencing with the
termination of the twelve (12)-month holding period after transfer and delivery
of the shares pursuant to Section 2.01(a)ii) (hereinafter the "Adjustment Review
Period") (which period shall end on __________), is less than $6.50, then the
provisions of this Section shall apply. If the Average Weighted Share Value of
shares during the Adjustment Review Period is equal to or greater than $6.50 per
share, there shall be no adjustment pursuant to this Section. If, however,
during the Adjustment Review Period the Average Weighted Share Value is less
than $6.50 per share, then Buyer shall deliver to Seller, at Buyer's option,
either
(a) additional Shares as soon as reasonably possible (but
not to exceed thirty (30) days) after the end of the Adjustment
Review Period, with a total share value equal to the sum of SIX
HUNDRED THOUSAND DOLLARS ($600,000) less the Average Weighted
Share Value at the end of the Adjustment Review Period multiplied
by 92,308. Any additional shares delivered pursuant to this
paragraph shall be registered Shares, subject to Buyer's
underwriters approval; or
(b) cash, as soon as reasonably possible (but not to exceed
thirty (30) days after the end of the Adjustment Review Period,
in an amount equal to the sum of SIX HUNDRED THOUSAND DOLLARS
($600,000) less the Average Weighted Share Value at the end of
the Adjustment Review Period multiplied by 92,308.
SECTION 2.03. TAXES. Seller shall pay all taxes, including income
and transfer taxes, if any, arising out of the sale of the Purchased Business to
Buyer, if any.
ARTICLE III
CLOSING
SECTION 3.01. THE CLOSING. The consummation of the transactions
contemplated by this Agreement (the "Closing") shall occur at the offices of
American Architectural Products, Inc., 000 Xxxxxxxx-Xxxxxxxx Xxxx, Xxxxxxxxxxx
Executive Xxxxxx, Xxxxxxxx X-Xxxx, Xxxxxxxx, XX 00000, upon the satisfaction of
all the contingencies contained in this Agreement, including specifically the
receipt by Buyer of funds from either the Offering or Comerica Bank in
7
8
accordance with Buyer's current commitment, but in no event later than December
31, 1997, unless otherwise agreed to in writing by Buyer and Seller (the
"Closing Date").
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF SELLER AND SHAREHOLDERS
As a material inducement to Buyer to enter into this Agreement,
and to consummate the transactions contemplated by this Agreement, Seller and
each of the Shareholders represents and warrants to Buyer as follows:
SECTION 4.01. ORGANIZATION; POWER. Seller is a corporation duly
organized, validly existing, and in good standing under the laws of Michigan and
is qualified as a foreign corporation and in good standing in every other state
where the failure to so qualify would have a material adverse effect on the
financial condition, business, assets or results of operations of the Purchased
Business taken as a whole (a "Material Adverse Effect"). Seller has all of the
requisite corporate power and authority to own, lease and operate its assets and
to carry on its business as it is now being conducted. The persons executing
this Agreement as Shareholders constitute all of the persons who own,
beneficially or of record, any shares of capital stock of the Seller. Except as
set forth on Schedule 1.01, Seller does not (a) own, of record or beneficially,
any outstanding voting securities of or other equity security interests in any
corporation, partnership, association, joint venture or other entity or (b)
control (directly or indirectly and alone or in combination with others) any
corporation, partnership, association, joint venture, or other entity.
Seller has all of the requisite corporate power and authority to
own its right, title, and interest in a corporation named "Team Pros America
Corporation" as disclosed in Schedule 1.01(p) of the Disclosure Schedules.
Further, Seller has all of the requisite corporate power and authority to sell,
transfer, or otherwise dispose of its interest in Team Pros America Corporation,
and that Seller has received any and all necessary third-party consents or
approval and any such sale, transfer, exchange, or disposition is not subject to
any further restrictions, third-party consents, or approval whatsoever.
SECTION 4.02. AUTHORITY, NO VIOLATION, ETC.
(a) This Agreement and the other agreements and documents
to be executed and delivered by Seller or any Shareholder
pursuant to the provisions of this Agreement constitute legal,
valid and binding obligations of Seller and each Shareholder,
enforceable against Seller and/or such Shareholder in accordance
with their respective provisions, except as enforceability may be
limited by (i) applicable bankruptcy, insolvency, reorganization,
moratorium and other similar laws and equitable principles of
general application affecting the rights of creditors and (ii)
general principles of equity affecting the right to specific
enforceability of any of the remedies contained herein and
therein. Except as set forth on Schedule 4.02(a) of the
Disclosure Schedules, the execution and delivery of this
Agreement, the consummation of the transactions
8
9
contemplated by this Agreement, and compliance by Seller and the
Shareholders with the provisions of this Agreement will not:
(i) result in a default or give rise to any right of
termination, cancellation or acceleration under any of the
provisions of any note, lien, bond, mortgage, indenture,
license, lease, agreement or other instrument or obligation
to which Seller or any Shareholder is a party or by which
Seller or any Shareholder may be bound, except for such
breach or default as to which valid waivers or consents
have been obtained;
(ii) violate any judgment, order, writ, injunction or
decree of any court, administrative agency or governmental
body applicable to Seller; or
(iii) cause, or give any person grounds to cause (with
or without notice, the passage of time or both), the
maturity of any liability or obligation of Seller to be
accelerated or increased.
(b) Except as set forth on Schedule 4.02(b) of the
Disclosure Schedules, the execution and delivery of this
Agreement by Seller, the consummation by Seller of the
transactions contemplated by this Agreement and compliance by
Seller with the provisions of this Agreement will not:
(i) conflict with or result in a breach of any
provision of the organizational documents of Seller or
result in a default or give rise to any right of
termination, cancellation or acceleration under any of the
provisions of any note, lien, bond, mortgage, indenture,
license, lease, agreement or other instrument or obligation
to which the Seller is a party or by which the Purchased
Business, any of its assets or its business may be bound,
except for such conflict, breach or default as to which
valid waivers or consents have been obtained;
(ii) violate any judgment, order, writ, injunction or
decree of any court, administrative agency or governmental
body applicable to the Purchased Business, its assets or
its business; or
(iii) cause, or give any person grounds to cause (with
or without notice, the passage of time, or both), the
maturity of any liability or obligation of the Purchased
Business to be accelerated or increased.
(c) Except as set forth on Schedule 4.02(c), all filings,
consents and approvals of third parties and governmental
authorities required in connection with the execution and
delivery by Seller of this Agreement and the consummation by
Seller of the transactions contemplated by this Agreement
(including any consents required under any contracts, agreements,
permits, licenses, leases, notes or other instruments of the
Seller in connection with the
9
10
change of ownership of the Purchased Business resulting from such
transactions) have been obtained.
SECTION 4.03. TAX MATTERS. Seller has accurately prepared in good
faith and has duly and timely filed with the appropriate Federal, state, local
or foreign governmental agencies ("Taxing Authorities") all tax returns or
reports required to be filed by Seller on behalf of the Purchased Business as
relate to the Purchased Business and the Purchased Assets. Except as set forth
on Schedule 4.03 of the Disclosure Schedules, all taxes due and payable by the
Seller with respect to the Purchased Business and the Purchased Assets to any
governmental authority for or with respect to the periods covered by such
returns and reports or with respect to any period (or portions thereof) ending
on or before the Closing Date and all interest, penalties, assessments and
deficiencies connected therewith, have been paid in full or the Seller has
adequately reserved for or made accruals with respect to all taxes due and
payable. All monies required to be withheld from employees of Seller for income
taxes, social security and other payroll taxes have been collected or withheld
and either paid to the respective governmental authorities, set aside in
accounts for such payments, or accrued, reserved against, and entered upon the
books of Seller. Except as set forth on Schedule 4.03, Seller has not executed
or filed with any taxing authority any agreement extending the period for
assessment or collection of any such taxes. Except as set forth on Schedule
4.03, Seller is not a party to any tax sharing agreement or to any pending
action or proceeding nor is any such action or proceeding threatened by any
governmental authority for the assessment or collection of taxes and no
deficiency notices or reports have been received by the Purchased Business with
respect to any of the tax returns of the Purchased Business. Except as set forth
on Schedule 4.03, within the past five (5) years, the Purchased Business has not
been subject to any Federal, state, local or foreign tax dispute or audit.
SECTION 4.04. COMPLIANCE WITH LAWS; NO DEFAULT OR LITIGATION.
(a) Other than Seller and shareholders' disclosed
default(s) on their obligations to the National Bank of Detroit,
Seller is not in default or violation under (i) any contract,
agreement, lease, consent, order or other commitment of the
Purchased Business or (ii) any law, rule, regulation, writ,
injunction, order or decree of any court or any foreign, Federal,
state, local or other governmental department, commission, board,
bureau, agency or instrumentality applicable to the Purchased
Business or the Purchased Assets;
(b) there are no actions, suits, claims, investigations or
legal, arbitration or administrative proceedings in progress,
pending or, to the best knowledge of Seller, threatened against
the Seller with respect to the consummation of the transactions
contemplated by this Agreement; and
(c) no action, suit, or proceeding has been instituted or,
to the best knowledge of Seller, is threatened to restrain or
prohibit or otherwise challenge the legality or validity of the
transactions contemplated by this Agreement.
SECTION 4.06. LEASED PERSONAL PROPERTY. Schedule 4.06 of the
Disclosure Schedules contains a true and complete list and copies of all leases
and other agreements under
10
11
which the Seller is a lessee with respect to the Purchased Business or the
Purchased Assets (including, but not limited to, tools, furniture, machinery,
vehicles, equipment, or other personal property) owned by any other person (the
"Leased Personal Property"). Except as set forth on Schedule 4.06, each of the
leases listed in Schedule 4.06 are in full force and effect and there are no
defaults thereunder on the part of the Seller or the Purchased Business, any
other party thereto, nor has any event occurred which, with notice or lapse of
time or both, would constitute a default thereunder by the Seller.
SECTION 4.07. FINANCIAL STATEMENTS. Seller has furnished to Buyer
true and complete copies of the following financial statements of the Purchased
Business (collectively referred to as the "Financial Statements"), copies of
which are attached as Schedule 4.07 of the Disclosure Schedules:
(a) The unaudited balance sheets of the Purchased Business
as of [December 31, 1996] and the related unaudited statements of
shareholders' equity, operations and cash flows for each of the
years in the three-year period ending December 31, 1996
(collectively, the "Prior Year Financial Statements"). The Prior
Year Financial Statements have been prepared from the books and
records of the Purchased Business in accordance with generally
accepted accounting principles ("GAAP") applied on a consistent
basis with prior periods, except as provided therein, and fairly
present the financial position of the Purchased Business as of
the dates thereof and the results of operations and cash flows of
the Purchased Business for the periods then ended.
(b) The unaudited balance sheet of the Purchased Business
as of October 31, 1997, and the related consolidated statements
of shareholders' equity, operations and cash flows for the eight
(8) month period ended October 31, 1997, (collectively, the
"Current Year Financial Statements"). Except as set forth on
Schedule 4.07, the Current Year Financial Statements have been
prepared from the books and records of the Purchased Business in
accordance with GAAP applied on a consistent basis with prior
periods (except for normal, recurring year-end adjustments),
fairly present the financial position of the Purchased Business
as of the date thereof, and fairly present the results of
operations and cash flows of the Purchased Business for the
periods then ended.
Except as set forth on Schedule 4.07, the Purchased Business has
no liabilities or obligations, fixed, contingent, accrued or otherwise which
should be but are not reflected in its October 31, 1997, balance sheet as
updated by Seller's September 1997 accounting entries in accordance with GAAP,
except for liabilities or obligations incurred since October 31, 1997, in the
ordinary and normal course of its business consistent with prior practice and
which will not have a Material Adverse Effect.
SECTION 4.08. INVENTORIES. Except as set forth on Schedule 4.08
of the Disclosure Schedules or as Seller may have reserved against in the
current financial statements of the Purchased Business, no material portion of
the inventories of the Purchased Business consist of items which are not
merchantable or which are not suitable and usable for the production or
completion of merchantable products for sale within one (1) year in the ordinary
11
12
course of its business as determined in accordance with GAAP and no material
portion of such inventories consists of any items which are slow-moving,
obsolete or of below-standard quality. The quantities of all lines of
inventories are reasonable and appropriate in the present circumstances of the
Purchased Business.
SECTION 4.10. MATERIAL CONTRACTS.
(a) Schedule 4.10(a) of the Disclosure Schedules lists and
includes copies (except no copies of purchase orders in an amount
less than Twenty-Five Thousand Dollars ($25,000) shall be
included) of all contracts, leases (other than those described in
Schedule 4.05 or Schedule 4.06 of the Disclosure Schedules, which
are incorporated by reference into Schedule 4.10(a)), agreements,
commitments, purchase orders, work orders, customer orders, and
other arrangements, including all amendments thereto, to which
the Purchased Business is a party, except for those contracts,
leases, commitments, purchase orders, work orders and agreements
(i) which were entered into in the ordinary course of business
and (ii) under which the obligations of the Purchased Business
have been or shall be fully discharged within ninety (90) days
from the date such obligation was entered into and (iii) which
individually involve an obligation or liability on the part of
the Purchased Business in any amount less than Ten Thousand
Dollars ($10,000) (the "Material Contracts").
(b) All of the Material Contracts are valid and binding
obligations of the Seller and are in full force and effect and,
except as set forth on Schedule 4.02(c), do not require the
consent of any other party thereto to the sale of the Purchased
Business or the Purchased Assets to Buyer hereunder to continue
to be valid and binding, except as enforceability may be limited
by (i) applicable bankruptcy, insolvency, reorganization,
moratorium and other similar laws and equitable principles of
general application affecting the rights of creditors and (ii)
general principles of equity affecting the right to specific
enforceability of any of the remedies contained therein. Except
as set forth in Schedule 4.10(b), (i) none of the payments
required to be made by Seller under any of the Material Contracts
has been prepaid more than thirty (30) days prior to the due date
of such payment thereunder and (ii) to the best knowledge of
Seller and the Purchased Business, there is not any existing
default, or event which, with notice or lapse of time, or both,
would constitute a default under any of the Material Contracts.
(c) Except as set forth on Schedule 4.10(c), Seller is not
a party to any of the following:
(i) any indenture, mortgage, note, guaranty, letter of
credit, installment obligation, agreement or other
instrument relating to the borrowing of money or the
guaranteeing of any obligation for the borrowing of money;
12
13
(ii) any agreement, contract, or other commitment that
would limit the ability of the Purchased Business (or any
manager or officer thereof) to compete in any line of
business or with any person or in any geographic area, or
otherwise to conduct the Purchased Business as presently
conducted, or to use or disclose any information in the
possession of the Purchased Business;
(iii) any license agreement, including any agreement
with respect to any manufacturing rights granted to or by
the Purchased Business; or
(iv) any joint venture or similar agreement.
(d) All prior contracts, leases, agreements and instruments
of the Seller have been fully performed by the Purchased Business
and the Purchased Business has no ongoing or unfulfilled
obligations thereunder, except for a certain XxXxxxxx Contract,
attached and identified on Schedule 4.10(d) of the Disclosure
Schedules.
(e) None of the Material Contracts which requires the
production of products or the provision of services has or may
have associated with it a negative gross or net margin, as
determined in accordance with GAAP.
SECTION 4.11. ACCOUNTS AND NOTES RECEIVABLE. Schedule 4.11 of the
Disclosure Schedules contains a true and complete list of unpaid accounts and
notes receivable (third party and intercompany) of the Purchased Business from
any other person as of October 31, 1997. Except as otherwise set forth in
Schedule 4.11 or as Seller may have reserved against in the current financial
statements of the Purchased Business, all of the accounts and notes receivable
as of the date of this Agreement constitute valid claims which arose in the
ordinary course of the Purchased Business and, except as set forth on Schedule
4.11, there is:
(a) no account or note receivable debtor who has refused
or, to the best knowledge of Seller and the Purchased Business,
threatened to refuse to pay its obligations for any reason;
(b) no account or note receivable debtor who is, to the
best knowledge of Seller and the Purchased Business, insolvent,
unable to pay its debts as they become due, or in bankruptcy; and
(c) no account or note receivable pledged to any third
party.
SECTION 4.12. CERTAIN TRANSACTIONS; ADVERSE CHANGE. Except as set
forth on Schedule 4.12 of the Disclosure Schedules, since October 31, 1997, the
Purchased Business has been operated in the ordinary course and has not:
(a) sold or in any way transferred or otherwise disposed of
any of its assets or property, except for sales of inventory in
the ordinary course of its
13
14
business or the disposition of other assets or property in the
ordinary course of business, consistent with past practice;
(b) incurred any obligation or liability, absolute,
accrued, contingent or otherwise, whether due or to become due,
except liabilities and obligations incurred in the ordinary
course of its business which will not have a Material Adverse
Effect;
(c) suffered any casualty, damage, destruction, loss or any
material interruption in use of any material assets or property
(whether or not covered by insurance) on account of fire, flood,
riot, strike or other hazard or Act of God;
(d) entered into any material agreement or made any
material commitment;
(e) received any notice of termination of any material
contract, lease or other agreement;
(f) made or suffered any material adverse change in its
financial condition, its assets or any aspect of the business;
(g) waived any right or canceled or compromised any debt or
claim, other than in the ordinary course of the business;
(h) made (or committed to make) capital expenditures in an
amount which exceeds One Hundred Thousand Dollars ($100,000) in
the aggregate;
(i) had any actual or overtly threatened employee strikes,
work stoppages, slow-downs, lock-outs or had any material change
in its relationship with any of its employees, salesmen,
distributors, sales representatives or independent contractors;
(j) made any change in the rate of compensation,
commission, benefits, bonus or other remuneration payable or paid
or agreed to pay any bonus, extra compensation, pension,
severance, vacation or other benefit to any shareholder,
director, officer, employee, salesman or distributor of the
Purchased Business, other than regularly scheduled increases,
bonuses or benefits about which Buyer has received prior written
notice;
(k) declared or paid any dividend or made any distribution
or other payment to any Seller; or
(l) without limitation by the enumeration of any of the
foregoing, except for the execution of this Agreement, entered
into any transaction other than in the ordinary course of its
business.
14
15
SECTION 4.13. CUSTOMERS AND SUPPLIERS. Except as set forth on
Schedule 4.13 of the Disclosure Schedules, neither Seller nor the Purchased
Business has any knowledge of any intention of or indication by a "Significant
Customer" (as defined below) or a "Significant Supplier" (as defined below) to
terminate its business relationship with the Purchased Business or to limit or
alter its business relationship with the Purchased Business in any material
respect. As used in this Agreement, (a) "Significant Customer" means any of the
twenty (20) largest customers, by sales revenue, of the Purchased Business
during the twelve (12) month period ending [December 31, 1996,] and (b)
"Significant Supplier" means any of the fifteen (15) largest suppliers, by
dollar volume, of the Purchased Business during the twelve month period ending
[December 31, 1996.] Schedule 4.13 of the Disclosure Schedules contains a true
and correct list of all of the Significant Customers and Significant Suppliers
of the Purchased Business as of [December 31, 1996.]
SECTION 4.14. WARRANTIES. Except as set forth on Schedule 4.14 of
the Disclosure Schedules, Seller has not made any oral or written warranties
with respect to the quality or absence of defects of its products or services
which are currently in force. Except as set forth on Schedule 4.14, there are no
claims pending or, to the best of Seller's knowledge and the knowledge of the
Purchased Business, anticipated or threatened against the Purchased Business
with respect to the quality or absence of defects in such products or services.
Schedule 4.14 also sets forth the amount and nature of any warranty claims
experienced by Seller in each of the years ended December 31, 1994, 1995, and
1996, and the period January 1, 1997, to the present. Seller is not subject to
any liability for warranty claims which is not shown or which is in excess of
the amounts shown or reserved for in the 1994, 1995, and 1996 year-end financial
statements or, other than liability for warranty claims incurred in the ordinary
course of business after December 31, 1996, consistent with past experience. As
of October 31, 1997, Seller has adequately provided for known, unknown,
anticipated, or possible future warranty claims in a manner and amount
consistent with past experience.
SECTION 4.15. LICENSES AND PERMITS.
(a) Seller possesses all franchises, licenses, permits,
certificates, approvals and other authorizations necessary to own
or lease and operate its assets and to conduct the business
presently conducted by the Purchased Business (the "Permits").
Schedule 4.15 of the Disclosure Schedules contains a true and
complete list and copies of each of the Permits.
(b) Seller has fulfilled and performed its obligations
under each of the Permits in all material respects, and no event
has occurred which constitutes or, after notice or lapse of time
or both, would constitute a breach or default under any of the
Permits or would permit revocation or termination of any of the
Permits.
(c) Except as set forth on Schedule 4.02(c), no consent is
required from the issuer of any Permit for such Permit to
continue in full force and effect following the transfer of the
Purchased Business and the Purchased Assets to Buyer.
15
16
SECTION 4.16. PROPRIETARY INFORMATION. Seller owns or possesses
the right to use the trade names, trademarks, trademark applications,
copyrights, copyright applications, patents, patent applications, inventions,
trade secrets, proprietary processes and formulae and all other proprietary
technical information, whether patentable or unpatentable, directly or
indirectly related to its products, services or operations or necessary to
conduct the Purchased Business as presently conducted (collectively, the
"Intellectual Property"). Schedule 4.16 of the Disclosure Schedules contains a
true and complete list and copies of each of the patents, copyrights,
trademarks, tradenames and service marks registrations and any and all pending
applications therefor, owned or licensed by the Seller (along with a designation
as to whether owned or licensed).
Neither Seller nor the Purchased Business has any knowledge of
any claim and neither has any reason to believe that any third party asserts
ownership rights in any of the Intellectual Property of the Seller. Neither
Seller nor the Purchased Business has any knowledge of any claim nor has any
reason to believe that use of any Intellectual Property by the Purchased
Business infringes upon any right of any third party. Neither Seller nor the
Purchased Business has any knowledge nor has any reason to believe that any
third party is infringing upon any of the rights of the Purchased Business in
any of the Intellectual Property.
SECTION 4.17. TITLE TO THE ASSETS OF THE PURCHASED BUSINESS;
COMPLETENESS AND CONDITION OF ASSETS. Except as disclosed on Schedule 4.17, the
assets owned or leased by the Seller in connection with the Purchased Business
and the Purchased Assets include all of the assets and properties which are
necessary to conduct the Purchased Business as presently conducted and to
perform all of the contracts, leases, agreements, commitments, purchase orders,
work orders, customer orders and other arrangements of the Purchased Business.
All of the tools, machinery and equipment of the Seller regularly used in the
Purchased Business are in good operating condition, ordinary wear and tear
excepted.
SECTION 4.18. ENVIRONMENTAL MATTERS. Schedule 4.18 of the
Disclosure Schedules contains (a) a description of (i) all licenses, permits,
and compliance schedules and, to the best of Seller's knowledge and the
knowledge of the Purchased Business, all regulatory plans which relate to the
Purchased Business, together with the durations and renewal dates thereof, and
(ii) all litigation, investigations, inquiries, and other proceedings, rulings,
orders or citations pending involving the Purchased Business of which Seller or
the Purchased Business has received notice or, to the best of Seller's knowledge
and the knowledge of the Purchased Business, threatened by government officials
with respect to the Purchased Business, as the result of any actual or alleged
failure of the Purchased Business to comply with any requirement of any
Environmental Laws (as hereinafter defined) and (b) a complete list of all solid
waste dumps and hazardous waste disposal, treatment and storage facilities which
are presently or, to the best of Seller's knowledge and the knowledge of the
Purchased Business, were used by the Purchased Business at any time during the
three (3) year period ending on the Closing Date for disposal of hazardous waste
as that term is defined in RCRA (as hereinafter defined).
Except as disclosed on Schedule 4.18:
(1) Seller has received all material permits and
approvals, kept all material records and made all material
filings required
16
17
by applicable Federal, state or local laws with respect to
emissions into the environment (including solids, liquids,
and gases) and the proper disposal of such materials
(including solid waste materials);
(2) Seller is not the subject of any Federal,
state or local investigation evaluating whether any
Remedial Action (as hereinafter defined) is needed to
respond to a Release (as hereinafter defined) of any
Contaminant (as hereinafter defined) into the environment;
(3) during the three (3) year period ending on the
Closing Date, Seller has not filed, nor has Seller been
required to file, any notice under Federal, state or local
laws indicating past or present treatment, storage or
disposal of a hazardous waste as defined under 40 C.F.R.,
Parts 260-270, or any state equivalent or reporting a spill
or Release of a Contaminant at, on, under or about any
property leased or used by the Purchased Business;
(4) except for discharges in accordance with
applicable Environmental Laws, the Purchased Business has
not released any hazardous waste or substance onto the
ground or waters of any property now or previously owned,
leased or used by the Purchased Business;
(5) no underground storage tanks or surface
impoundments are located at, on or under any property now
or previously owned or leased by the Purchased Business;
and
(6) no lien in favor of any governmental authority
for (1) any liability under any Environmental Laws or (2)
to the best of Seller's knowledge and the knowledge of the
Purchased Business, damages arising from or costs incurred
by such governmental authority in response to a Release of
a Contaminant into the environment has been filed or
attached to the property leased by the Seller on behalf of
the Purchased Business.
For purposes of this Agreement:
(a) "Contaminant" means those substances which are
regulated by or form the basis of liability under any
Environmental Laws, including, but not limited to, asbestos and
polychlorinated biphenyls ("PCBs");
(b) "Environmental Laws" means all applicable Federal,
state and local laws, regulations or ordinances relative to air
quality, water quality, solid waste management, hazardous or
toxic substances or the protection of health or the environment
including, but not limited to, the Comprehensive Environmental
Response, Compensation, and Liability Act of 1980, as amended (42
U.S.C. Section 9601, et seq.), the Hazardous Material
Transportation Act (49 U.S.C. Section 1801, et seq.), the Federal
Water Pollution Control Act (33 U.S.C. Section 1251, et seq.),
the
17
18
Resource Conservation and Recovery Act of 1976, as amended (42
U.S.C. Section 6901, et seq.) ("RCRA"), the Clean Air Act, as
amended (42 U.S.C. Section 7401, et seq.), the Toxic Substances
Control Act, as amended (15 U.S.C. Section 2601, et seq.), the
Federal Insecticide, Fungicide, and Rodenticide Act, as amended
(7 U.S.C. Section 136, et seq.), the Clean Water Act of 1977, as
amended (33 U.S.C. Section 1251, et seq.), and the National
Environmental Policy Act of 1969, as amended (42 U.S.C. Section
4321, et seq.), and any analogous state or local statutes and the
regulations promulgated pursuant thereto;
(c) "Release" means any release, spill, emission, leaking,
pumping, injection, deposit, disposal, discharge, dispersal,
leaching or migration into the environment, including the
movement of any Contaminant or other substance through or in the
air, soil, surface water, groundwater or property; and
(d) "Remedial Action" means any action required under any
Environmental Laws to (i) clean up, remove, treat or in any other
way address any Contaminant or other substance in the
environment, (ii) prevent the Release or threat of Release or
minimize the further Release of any Contaminant or other
substance so it does not migrate or endanger or threaten to
endanger public health or welfare or the environment or (iii)
perform preremedial studies and investigations and post-remedial
monitoring and care.
SECTION 4.19. EMPLOYEE BENEFIT PLANS.
(a) Schedule 4.19(a) of the Disclosure Schedules contains a
true and complete list and copies of each contract, agreement,
plan or arrangement which is an "employee benefit plan," as
defined in Section 3(3) of the Employee Retirement Income
Security Act of 1974, as amended ("ERISA"), currently maintained
by or on behalf of the Purchased Business covering the employees
of the Purchased Business or to which the Purchased Business is
currently obligated to contribute (collectively, the "Employee
Benefit Plans"). Except as disclosed on Schedule 4.19(a), with
respect to each Employee Benefit Plan:
(i) as to each such Employee Benefit Plan which is a
"pension plan" (within the meaning of ERISA section 3(2),
but not including a "multi-employer plan" within the
meaning of Section 3(37) of ERISA) (a "Pension Plan"), the
Pension Plan is qualified under section 401(a) of the
Internal Revenue Code (the "Code"), to the extent it is
intended to be so qualified, and complies in all respects
with ERISA;
(ii) a determination letter has been received from the
Internal Revenue Service (or an application for such
determination letter is currently pending) with respect to
the tax qualified status of each Pension Plan and the
Purchased Business has satisfied all conditions to which
each such determination letter is subject;
18
19
(iii) no Pension Plan has an "accumulated funding
deficiency," whether or not waived, as defined in section
302(a)(2) of ERISA;
(iv) no "reportable event" within the meaning of
section 4043(b) of ERISA has occurred with respect to any
Pension Plan;
(v) no notice of intent to terminate any Pension Plan
that is subject to Subtitle B of Title IV of ERISA has been
provided to participants or filed with the Pension Benefit
Guaranty Corporation ("PBGC") under section 4041 of ERISA,
nor has the PBGC instituted any proceeding under section
4042 of ERISA to terminate any Pension Plan, nor has there
been, since January 1, 1976, any termination or partial
termination of any such Pension Plan within the meaning of
Section 411(d)(3) of the Code;
(vi) there has been no non-exempt "prohibited
transaction" within the meaning of Section 4975 of the Code
or Section 406 of ERISA with respect to any such Employee
Benefit Plan; and
(vii) all disclosures and filings respecting each such
plan required under ERISA or the Code has been timely
provided and each Employee Benefit Plan has been
administered in all respects in accordance with its
governing documents and is in compliance with all
applicable laws including, specifically, the Retirement
Equity Act of 1984 and the Consolidated Omnibus Budget
Reconciliation Act of 1985.
(b) Except as disclosed on Schedule 4.19(b), with respect
to each Employee Benefit Plan, there are no pending claims,
investigations or causes of action as to which the Purchased
Business has received notice and, to the best of Seller's
knowledge and the knowledge of the Purchased Business, no claims
are planned or threatened against any Employee Benefit Plan or
fiduciary of any Employee Benefit Plan by any participant,
beneficiary or governmental agency with respect to the
qualification or administration of any Employee Benefit Plan.
(c) Except as disclosed on Schedule 4.19(c), the Purchased
Business has no liability, jointly or otherwise, for (i) any
pension plan for which the Purchased Business or a member of the
Seller's controlled group (within the meaning of Section 4001(b)
of ERISA (a "Controlled Group") is or was a contributing sponsor
that is subject to Subtitle B of Title IV of ERISA, or (ii) any
withdrawal liability demanded or yet to be demanded under Title
IV of ERISA by any multi-employer plan within the meaning of
Section 3(37) of ERISA (a "Multi-Employer Plan") for a complete
or partial withdrawal from such Multi-Employer Plan for any
Controlled Group of which the Purchased Business is or was a
member.
(d) Except as disclosed on Schedule 4.19(d), neither Seller
nor the Purchased Business has made any representation to or
agreement with any of the
19
20
employees of the Purchased Business (whether written or oral)
with respect to (i) the provision of any employee benefits by
Buyer or the Purchased Business beyond the Closing Date, or (ii)
the continuation of any benefits by Buyer or the Purchased
Business beyond the Closing Date under any of the Employee
Benefit Plans.
SECTION 4.20. LITIGATION; PRODUCT LIABILITY; WORKERS'
COMPENSATION.
(a) Except as disclosed on Schedule 4.20(a) of the
Disclosure Schedules, there is no litigation, suit, proceeding,
action, claim or investigation against the Purchased Business
before any governmental authority and there are no facts known to
Seller or the Purchased Business that might reasonably be
expected to result in any such litigation, suit, proceeding,
action, claim or investigation. The Purchased Business is not
subject to or in default with respect to any presently existing
order, writ, injunction, decree or written notice received by the
Purchased Business of any governmental authority.
(b) Except as disclosed on Schedule 4.20(b) of the
Disclosure Schedules, there have been no material warranty,
charge back or product liability claims made against the
Purchased Business for the three (3) year period prior to the
date of this Agreement.
(c) Except as disclosed on Schedule 4.20(c) of the
Disclosure Schedules, there are no workers' compensation claims
involving the Purchased Business for which any current or former
employee of the Purchased Business is receiving ongoing medical
or wage benefits.
SECTION 4.21. EMPLOYEES, CONSULTANTS AND INDEPENDENT CONTRACTORS.
(a) Set forth on Schedule 4.21(a) of the Disclosure
Schedules is a true and complete list of each person employed by
the Purchased Business as of seven (7) days prior to the Closing
Date which identifies each such person by name, social security
number, date of hire, current compensation, date of birth, sex
and status as an hourly or salaried employee. Schedule 4.21(a)
identifies persons who are not actively-at-work as of such date,
describes the date such inactive status commenced, the cause of
such inactive status at the date such inactive status commenced
(e.g. layoff, leave of absence or disability) and lists the
employee benefits, workers' compensation benefits and any other
compensation or benefits applicable to each such person as of the
Closing Date. For purposes of this Schedule 4.21(a), persons
absent due to vacation shall be considered to be
actively-at-work.
(b) Schedule 4.19(a) and Schedule 4.21(b) of the Disclosure
Schedules set forth a true and complete list and copies of all
agreements with any of the current or former employees,
consultants and independent contractors of the Purchased Business
to which the Seller is a party or by which it is bound and, in
20
21
any such case, pursuant to which the Purchased Business has any
continuing obligations.
(c) Schedule 4.21(c) of the Disclosure Schedules sets forth
a true and complete list of all consultants and independent
contractors of the Purchased Business who had, during the twelve
(12) month period ended [December 31, 1996,] received
remuneration from the Purchased Business in excess of Twenty
Thousand Dollars ($20,000) together with the current compensation
for each such consultant and independent contractor, other than
legal and accounting.
SECTION 4.22. INSURANCE. Schedule 4.22 of the Disclosure
Schedules sets forth a true and complete list and copies of all policies of
liability, theft, fidelity, fire, product liability, workers' compensation and
other forms of insurance held by the Purchased Business, and specifies the
insurer, amount of coverage, type of insurance and policy numbers. Schedule 4.22
also sets forth any pending claims under such policies. The policies listed in
Schedule 4.22 are outstanding and in full force and effect and all premiums due
and payable with respect to such policies have been paid in full.
ARTICLE V
WARRANTIES AND REPRESENTATIONS OF BUYER
As a material inducement to Seller to enter into this Agreement
and to consummate the transactions contemplated by this Agreement, Buyer
represents and warrants to Seller as follows:
SECTION 5.01. ORGANIZATION; POWER. Buyer is a corporation duly
organized, validly existing and in good standing under the laws of Delaware.
Buyer has all the requisite corporate power and authority to own, lease and
operate its business as it is now being conducted and to enter into this
Agreement.
SECTION 5.02. AUTHORITY, NO VIOLATION, ETC. The execution and
delivery of this Agreement by Buyer and the consummation of the transactions
contemplated by this Agreement have been duly and validly authorized by all
necessary corporate action on the part of Buyer. This Agreement, and the other
agreements and documents to be executed and delivered by Buyer pursuant to the
provisions of this Agreement, constitute legal, valid and binding obligations of
Buyer, enforceable against Buyer in accordance with their respective provisions
and conditions, except as enforceability may be limited by (i) applicable
bankruptcy, insolvency, reorganization, moratorium and other similar laws and
equitable principles of general application affecting the rights of creditors
and (ii) general principles of equity affecting the right to specific
enforceability of any of the remedies contained herein and therein. The
execution and delivery of this Agreement, the consummation of the transactions
contemplated by this Agreement and compliance by Buyer with the provisions of
this Agreement will not:
(a) conflict with or result in a breach of any provision of
the organizational documents of Buyer or result in a default or
give rise to any right of termination, cancellation or
acceleration under any of the provisions of any
21
22
note, lien, bond, mortgage, indenture, license, lease, agreement
or other instrument or obligation to which Buyer is a party or by
which Buyer, any of its assets or its business may be bound,
except for such conflict, breach or default as to which valid
waivers or consents have been obtained;
(b) violate any judgment, order, writ, injunction or decree
of any court, administrative agency or governmental body
applicable to Buyer, its assets or its business; or
(c) cause, or give any person grounds to cause (with or
without notice, the passage of time, or both), the maturity of
any liability or obligation of Buyer to be accelerated or
increased.
All filings, consents and approvals of third parties and
governmental authorities required in connection with the execution and delivery
by Buyer of this Agreement and the consummation by Buyer of the transactions
contemplated by this Agreement have been or will be obtained.
SECTION 5.03. NO LITIGATION. No action, suit or proceeding has
been instituted or, to the best knowledge of Buyer, is threatened to restrain or
prohibit or otherwise challenge the legality or validity of the transactions
contemplated by this Agreement.
ARTICLE VI
DELIVERIES AND CONDITIONS PRECEDENT TO BUYER'S OBLIGATIONS
SECTION 6.01. DELIVERIES TO SELLER AT THE CLOSING. At the
Closing, and simultaneously with the deliveries to Buyer specified in Section
6.02 of this Agreement or as otherwise agreed, Buyer shall deliver or cause to
be delivered to Seller, or Seller's principals, the following:
(a) Payment of the Purchase Price at Buyer's sole option
and discretion as provided in any of Section 2.01(a)(i) or
Section 2.01(a)(ii) or Section 2.01(a)(iii);
(b) an Option to Seller permitting Seller or its
shareholders to purchase up to Forty Thousand (40,000) additional
shares of common stock of AAPC for a period of eighteen (18)
months at an exercise price of SIX DOLLARS FIFTY CENTS ($6.50)
per share in accordance with a certain Option Agreement; and
(c) payment by cash or certified check in the amount of
FIFTY-SIX THOUSAND DOLLARS ($56,000) to Doyco, Inc., Pension
Plan, which represents full payment on a note from Doyco, Inc.,
Pension Plan to the Seller; and
(d) payment by cash or certified check jointly to Seller
and the Oakland County Treasurer in such an amount which
represents full payment of
22
23
Seller's obligation or liability for certain real estate or
personal property taxes payable to the Oakland County, Michigan,
Treasurer, which amounts shall be conveyed by Seller to the
Oakland County, Michigan, Treasurer, and all encumbrances on the
Owned Real Property or any of the Purchased Assets released at
that time.
(e) any other documents or instruments of conveyance and
transfer as Seller may reasonably request for the purpose of
assigning, transferring, granting, conveying and confirming the
sale of the Purchased Business and the Purchased Assets or any
part thereof to Buyer.
SECTION 6.02. DELIVERIES TO BUYER AT THE CLOSING. At the Closing,
and simultaneously with the deliveries to Seller specified in Section 6.01 of
this Agreement, Seller shall deliver or cause to be delivered to Buyer the
following:
(a) a duly executed Xxxx of Sale;
(b) UCC financing statements or similar instruments or
documents duly executed by any lienholders releasing their
security interests, if any, in the Purchased Assets;
(c) a duly executed Receipt;
(d) Non-Competition Agreements in form and substance
satisfactory to Buyer executed by Seller and each of the
principals of Seller and each shareholder of Seller. Said
Non-Competition Agreements shall provide that Seller and each
shareholder of Seller shall refrain from competing in any manner
with the business being acquired by Buyer;
(e) written documentation of the release of all liens
against the real property of Seller, including, but not limited
to written documentation of the release of all liens against the
real property of the Buyer, including documents indicating that
such releases have been recorded in the Oakland County Recorder's
Office;
(f) written documentation regarding the payment and
satisfaction of any and all tax liability to the City of Detroit
with regard to any issue, including specifically a certain
withholding tax dispute which has been disclosed to Buyer in
Schedule 4.03. To the extent Seller and/or its shareholders fail
to pay and satisfy any and all tax liability to the City of
Detroit at or prior to Closing, written documentation of said
payment and satisfaction of any and all tax liabilities to the
City of Detroit will be provided no later than December 31, 1997;
(g) a Waiver and Consent Agreement duly executed by each
stockholder of Team Pros America Corporation granting Seller all
the requisite
23
24
corporate power and authority to sell, transfer, or otherwise
dispose of its interest in Team Pros America Corporation to
Buyer;
(h) all right, title and interest of Seller in the stock of
a certain corporation named Team Pros America Corporation,
including the stock certificates, together with fully executed
stock powers; and
(i) any other documents or instruments of conveyance and
transfer as Buyer may reasonably request for the purpose of
assigning, transferring, granting, conveying and confirming the
sale of the Purchased Business and the Purchased Assets or any
part thereof to Buyer.
SECTION 6.03. CONDITIONS PRECEDENT TO BUYER'S OBLIGATIONS. The
obligations of Buyer under this Agreement shall, at the option of Buyer, be
subject to the satisfaction, on or prior to the Closing of the following
conditions:
(a) Buyer, in the exercise of its sole discretion, shall
have opted to exercise any of the three (3) payment options in
Section 2.01(a). The parties hereto recognize that whether the
consideration for the transactions contemplated by this Agreement
include payment of a Cash Purchase Price as defined in Section
2.01(a)(i) or (ii) or an Exchange of Assets for Stock, as
described in Section 2.01(a)(iii) and Section 2.02, that any
financing required to satisfy the Purchase Price described in
Section 2.01 to be received from Comerica Bank shall be in
accordance with Buyer's current commitment with Comerica Bank for
any such financing.
(b) There shall have been no material breach by Seller or
any shareholder in the performance of any of its covenants,
representations, warranties, and agreements herein; each of the
representations and warranties of Seller and shareholders
contained or referred to herein shall be true and correct in all
material respects on the Closing Date as though made on the
Closing Date, except for changes specifically permitted by this
Agreement or resulting from any transaction expressly consented
to in writing by the Buyer. There shall have been delivered to
the Buyer a certificate to such effect, dated the Closing date,
signed by each of the shareholders and by and on behalf of the
Seller.
(c) Between the date hereof and the Closing, there shall
have been
(i) no material adverse change in the Purchased
Business, Purchased Assets or the Seller's business or the
financial condition, property, prospects, operations,
liabilities, profits, or condition (financial or otherwise)
of Seller; and
(ii) Seller shall have made no capital expenditure in
excess of One Hundred Thousand Dollars ($100,000) in the
aggregate without prior written consent of Buyer; and
24
25
(iii) Seller shall have made no increase in wages,
salaries or benefits to any principal, shareholder agent
and/or employee of Seller except for regularly scheduled
increases about which the Buyer has received prior notice;
and
(iv) there shall have been no material adverse federal
or state legislative or regulatory change effecting the
Purchased Business, the Purchased Assets or Seller's
operations, products or services; and
(v) there shall have been no material damage to the
Purchased Business or the Purchased Assets by fire, flood,
casualty, act of God, or the public enemy or other cause,
regardless of insurance coverage for such damage; and there
shall have been delivered to the Buyer a certificate to
such effect dated as of the Closing signed by each of the
shareholders and by and on behalf of Seller.
(d) There shall have been no action, suit, investigation or
proceeding instituted or threatened by any governmental or
regulatory agency to restrain, prohibit or otherwise challenge
the legality or validity of the transactions contemplated by this
Agreement.
(e) Parties shall have received all governmental and
regulatory approvals and actions necessary to consummate the
transactions contemplated by this Agreement.
(f) Seller shall have received consents, in form and
substance reasonably satisfactory to the Buyer, to the
transactions contemplated by this Agreement from all appropriate
governmental authorities and from the other parties to all
contracts, leases, agreements, and permits to which Seller or any
shareholder is a party or by which Seller, any shareholder or any
of the Purchased Assets are affected and which otherwise require
such consent prior to the Closing or, in the good faith judgment
of the Buyer, are necessary to prevent an adverse change in the
Purchased Business or Purchased Assets or in the operations,
liabilities, profits, prospects or condition (financial or
otherwise), of Seller.
(g) Seller and Seller's shareholders shall have executed a
Non-Competition Agreement in form and substance acceptable to
Buyer which provides that Seller and Seller's shareholders shall
refrain from competing in any manner with the Purchased Business
that Buyer is acquiring as part of this Agreement.
(h) Seller and Shareholders shall have received any and all
necessary waivers and consents from Team Pros America
Corporation, a Delaware corporation, and its stockholders to
permit Seller to transfer all of its right, title, and interest
in the stock of Team Pros America Corporation. Further, Seller
and shareholders shall comply with any and all other requirements
from Team Pros
25
26
America Corporation as part of any Waiver and Consent Agreement.
Seller and shareholders also agree that their obligations under
the Waiver and Consent Agreement with Team Pros America
Corporation and its stockholders will survive the Closing of this
transaction.
(i) Seller and Shareholders shall have resolved any and all
tax disputes or audits with any federal, state, local or foreign
government agency and Seller and Shareholders shall have secured
and recorded any necessary releases to insure that none of the
purchased assets are encumbered as a result of any tax dispute or
liability of Seller or any of Shareholders.
(j) Seller shall have forgiven any and all debt from its
Shareholders at Closing, and Seller shall produce written
documentation regarding the forgiveness of the debt of the Seller
held by each Shareholder of Seller.
(k) All matters, proceedings, instruments, and documents
required to carry out this Agreement or incidental thereto and
all other relevant legal matters shall be reasonably satisfactory
to counsel for the Buyer.
ARTICLE VII
ADDITIONAL COVENANTS OF THE PARTIES
SECTION 7.01. FURTHER ASSURANCES. Seller, after the Closing,
without further consideration, shall execute, acknowledge and deliver any
further assignments, conveyances and other assurances, documents and instruments
of transfer, reasonably requested by Buyer, and shall take any other action
consistent with the terms of this Agreement that may reasonably be requested by
Buyer for the purpose of assigning, transferring, granting, conveying and
confirming the Purchased Business or the Purchased Assets or any part thereof to
Buyer.
SECTION 7.02. ACCESS TO RECORDS. For a period of five (5) years
after the Closing Date, Buyer shall retain or cause the Purchased Business to
retain and make the books and records of the Purchased Business available for
inspection by Seller or its duly authorized representatives and Seller and its
representatives shall have reasonable access to (including the right to make
copies), all of such books and records, to the extent that such access may
reasonably be required in connection with matters relating to or affected by the
operation of the Purchased Business or the Purchased Assets prior to the
Closing. Seller shall be solely responsible for any costs or expenses incurred
by it pursuant to this Section 7.02. After such five (5) year period, all such
records may be destroyed by Buyer or the Purchased Business, unless Seller
reasonably requests that such records be retained, at Seller's expense.
SECTION 7.03. PUBLIC STATEMENTS. Except for disclosures required
by applicable law and subject to the provisions of Section 10.14, Buyer and
Seller shall mutually agree upon the timing and content of any and all
announcements and public statements relating to the signing of this Agreement
and the transactions contemplated by this Agreement.
26
27
SECTION 7.04. CHECKS AND DRAFTS. Seller shall honor (whether
presented before, on or after the Closing) all checks and drafts drawn by it on
or prior to the Closing to pay trade payables and accrued expenses of the
Purchased Business in conducting the Purchased Business in the ordinary course.
SECTION 7.05. EXERCISE OF PURCHASE PRICE OPTIONS. The parties
hereto recognize that a portion of the Purchase Price described in Section
2.01(a) provides Buyer with three (3) alternative payment options. The parties
hereto recognize that Buyer, in its sole discretion, may exercise any of these
three (3) payment options in Section 2.01(a). The parties also recognize that
whether the consideration for the transactions contemplated by this Agreement
include any financing required from Comerica Bank, said financing shall be in
accordance with Buyer's current commitment with Comerica Bank for any such
financing.
SECTION 7.06. ESCROW AGREEMENT. Seller agrees to the placement of
TWO HUNDRED THOUSAND DOLLARS ($200,000) of any Cash Purchase Price referenced in
Section 2.01(a)(i) or (ii) above, into an interest-bearing escrow account
pursuant to a certain Escrow Agreement, which shall be on terms and conditions
acceptable to Buyer, at its sole discretion (the "Escrow Agreement"). The Escrow
Agreement shall provide for the escrow of TWO HUNDRED THOUSAND DOLLARS
($200,000) to indemnify Buyer for damages pursuant to Article IX of this
Agreement. The Escrow Agreement shall provide for Buyer's Accountant to serve as
Escrow Agent. But for unforeseen circumstances in regard to such audit, the
Escrow Agreement shall terminate upon the earlier of thirty (30) days after the
completion of Seller's 1997 year-end financial audit or April 1, 1998.
ARTICLE VIII
BULK SALES COMPLIANCE
SECTION 8.01. BULK SALES COMPLIANCE. Each of Buyer, Seller, and
the Purchased Business have issued a notice in compliance with the provisions of
the applicable statutes relating to bulk transfers or bulk sales. In accordance
with the provisions of Section 9.01 of this Agreement, Seller and its
shareholders shall indemnify and hold Buyer harmless from and against any and
all losses, costs, damages, claims or expenses which Buyer may sustain by reason
of Seller's failure to provide accurate information in regard to compliance with
such bulk transfer or bulk sales provisions.
ARTICLE IX
INDEMNIFICATION
SECTION 9.01. INDEMNIFICATION BY SELLER AND SHAREHOLDERS. Subject
to the limitation contained in Section 9.07, below, Seller and its Shareholders
shall indemnify, defend and hold each of Buyer and the Purchased Business and
their respective successors, permitted assigns, shareholders, directors,
officers, employees and other affiliates (collectively, "Buyer's Indemnified
Persons") harmless from and against any loss, damage, liability, claim, action,
cause of action, regulatory, legislative or judicial proceedings or
investigations, assessments, levies, fines, penalties, costs and expenses
including, but not limited to, reasonable attorneys',
27
28
accountants', investigators' and experts' fees and expenses, reasonably
sustained or incurred in connection with the defense or investigation of any
such claim (collectively "Damages"), arising out of or in any way relating to:
(a) the failure by Seller or Shareholders to substantially
perform any of its material obligations under this Agreement;
(b) the failure by Seller or Shareholders to discharge when
due any Excluded Liability;
(c) any misrepresentation in or breach of the
representations and warranties of Seller or Shareholders or the
failure of Seller or its Shareholders to perform any of its
covenants or obligations contained in this Agreement or in any
instrument or document furnished or to be furnished by Seller
pursuant to this Agreement or in connection with the transactions
contemplated by this Agreement;
(d) except for liabilities and obligations reflected in the
October 31, 1997, balance sheet and those liabilities and
obligations incurred since October 31, 1997, in the ordinary and
normal course of the Purchased Business consistent with prior
practice and disclosed to Buyer (the "Assumed Obligations"), the
operation of the Purchased Business on or prior to the Closing
Date, including all claims and proceedings the facts forming the
basis for which occurred on or prior to the Closing Date, whether
or not disclosed by Seller to Buyer;
(e) any actions, claims, suits or proceedings asserted by
third parties alleging personal injury or property damage due to,
arising out of, or by reason of the design, manufacture or use of
any products of the Purchased Business on or prior to the Closing
Date;
(f) any action, claim, suit, proceeding, or obligation of
Seller and/or shareholders with regard to any and all tax
filings, disputes, or audits with any federal, state, local, or
foreign government agency, regardless of whether Seller and
shareholders shall have disclosed issues with regard to any such
tax filings, disputes, or audits to Buyer;
(g) any workers' compensation claims of any employee or
former employee of the Purchased Business relating to events
occurring on or prior to the Closing Date;
(h) any Environmental Claim (as hereinafter defined)
arising under any of the Environmental Laws or any Remedial
Action arising pursuant to any of the Environmental Laws
including, but not limited to, investigation, remediation or
removal of any Contaminant arising out of or based upon the
operation of the Purchased Business on or prior to the Closing
Date (Buyer and Seller agreeing that the disclosures made
pursuant to Schedule 4.18 or any attachment thereto in
28
29
no way limit the right of any of Buyer's Indemnified Persons to
indemnification under this Section 9.01);
(i) except for the Assumed Obligations, any and all claims
for compensation and other employee benefits (including, but not
limited to, severance pay, outplacement benefits, disability
benefits, health, retiree medical, workers' compensation, tuition
assistance, death benefits and pension and profit sharing plans
and claims relating to employment or termination of employment)
accruing on or prior to the Closing Date or on or after the
Closing Date with respect to the payment of severance benefits
and other welfare benefit payments, if any, with respect to (i)
employees of the Purchased Business who have ceased employment
with the Purchased Business on or prior to the Closing Date and
(ii) employees of the Purchased Business who, on the Closing
Date, are on medical leave, maternity leave, temporary lay-off or
disability and related costs and liabilities, regardless of
whether such claims and related costs and liabilities are made or
incurred before, on or after the Closing Date;
(j) except for the Assumed Obligations, all claims,
investigations by third parties other than Buyer, actions, suits,
proceedings, assessments, judgments, costs and expenses,
including reasonable attorneys' fees and expenses (incurred
thereon at trial and upon appeal), incident to the foregoing; or
(k) any misrepresentation in or failure to provide accurate
information or representations with regard to the due diligence
requests which preceded this Agreement or in any instrument or
document furnished or to be furnished by Seller pursuant to this
Agreement.
(l) any liability of the Seller and the Shareholders with
regard to the treatment of the transaction contemplated by this
Agreement as being a C reorganization within the meaning of
Section 368(a)(1)(C) of the Code.
Seller shall only be obligated to indemnify Buyer to the extent the above
amounts exceed the proceeds of Seller's insurance, if any, paid to Buyer
covering the claims or recoveries from third parties. Buyer and Seller mutually
agree to waive any right of subrogation against the other which might be
asserted by either party's insurer(s).
"Environmental Claim" means any notice of any violation, claim,
demand, abatement or other order (conditional or otherwise) by any governmental
authority or any person (other than Buyer's Indemnified Persons) for personal
injury (including sickness, disease or death), tangible or intangible property
damage, damage to the environment, nuisance, pollution, contamination or other
adverse affects on the environment or for fines, penalties or restrictions,
resulting from or based upon (i) the existence or the continuation of the
existence of a Release (including, but not limited to, sudden or non-sudden,
accidental or non-accidental Releases) of, or exposure to, any substance,
chemical, material, pollutant, Contaminant, odor or audible noise or other
release or emission in, into or onto the environment (including, but not limited
to, the air, ground, water or any surface) at, in, by, from or related to the
Purchased Business in amounts in excess of the applicable legal standards, (ii)
the environmental aspects of the
29
30
transportation, storage, treatment or disposal of Contaminants or other
substances in connection with the operation of the Purchased Business or (iii)
the violation, or alleged violation, of any presently enacted or pending
statutes, ordinances, orders, rules, regulations, Permits or licenses of or from
any governmental authority, agency or court relating to environmental matters
connected with the operation of the Purchased Business; provided, however, that
any of Buyer's Indemnified Persons shall have the right to pursue an
Environmental Claim against Seller in the event any of them suffer or incur any
bona fide personal injury or property damage.
SECTION 9.02. INDEMNIFICATION BY BUYER. Buyer shall indemnify,
defend and hold Seller and its successors or assigns (collectively, "Seller's
Indemnified Persons") harmless from and against any loss, damage, liability,
claim, action, cause of action, regulatory, legislative or judicial proceedings
or investigations, assessments, levies, fines, penalties, costs and expenses
including, but not limited to, reasonable attorneys', accountants',
investigators' and experts' fees and expenses, reasonably sustained or incurred
in connection with the defense or investigation of any such claim (collectively
"Damages"), arising out of or in any way relating to:
(a) any misrepresentation in or breach of the
representations and warranties of Buyer or the failure of Buyer
to perform any of its covenants or obligations contained in this
Agreement or in any instrument or document furnished or to be
furnished by Buyer pursuant to this Agreement or in connection
with the transactions contemplated by this Agreement;
(b) Any liabilities, obligations, claims, suits or
proceedings asserted by third parties due to, arising out of, or
by reason of the operation of the Purchased Business after the
Closing Date except for those items referred to in Section 9.01
of this Agreement;
(c) the Assumed Obligations; or
(d) all claims, investigations, actions, suits,
proceedings, demands, assessments, judgments, costs and expenses,
including reasonable attorneys' fees and expenses (incurred
thereon at trial and upon appeal), incident to the foregoing.
SECTION 9.03. NOTICE. If any person believes that he, she or it
has suffered or incurred any Damages, that person shall so notify the
indemnifying party promptly in writing describing such loss or expense, the
amount thereof, if known, and the method of computation of such Damages, all
with reasonable particularity to permit the indemnifying party to assess the
nature and cost of the claim. If any action at law, suit in equity or
administrative action is instituted by or against a third party with respect to
which any person intends to claim any liability or expense as Damages under this
Article IX, such person shall promptly notify the indemnifying party of such
action.
SECTION 9.04. DEFENSE OF CLAIMS. The indemnifying party shall
have thirty (30) calendar days after receipt of either notice referred to in
Section 9.03 of this Agreement to notify the indemnified party that it elects to
conduct and control any legal or administrative action or
30
31
suit with respect to an indemnifiable claim. If the indemnifying party does not
give such notice, the indemnified person shall have the right to defend,
contest, settle or compromise such action or suit in the exercise of its
exclusive discretion, and the indemnifying party shall, upon request from the
indemnified person, promptly pay the indemnified person in accordance with the
other provisions of this Article IX the amount of any Damages resulting from its
liability to the third party claimant. If the indemnifying party gives such
notice, it shall have the right to undertake, conduct and control, through
counsel of its own choosing at its sole expense, the conduct and settlement of
such action or suit, and the indemnified person shall cooperate with the
indemnifying party in connection therewith; provided, however, that (a) the
indemnifying party shall not thereby permit to exist any lien, encumbrance or
other adverse charge securing the claims indemnified hereunder upon any asset of
the indemnified person, (b) the indemnifying party shall not thereby consent to
the imposition of any injunction against the indemnified person without the
written consent of the indemnified person, (c) the indemnifying party shall
permit the indemnified person to participate in such conduct or settlement
through counsel chosen by the indemnified person, but the fees and expenses of
such counsel shall be borne by the indemnified person except as provided in
clause (d) below, and (d) upon a final determination of such action or suit, the
indemnifying party shall agree promptly to reimburse to the extent required
under this Article IX (subject to the provisions of Section 9.07 of this
Agreement) the indemnified person for the full amount of any Damages resulting
from such action or suit and all reasonable and related expenses incurred by the
indemnified person, except fees and expenses of counsel for the indemnified
person incurred after the assumption of the conduct and control of such action
or suit by the indemnifying party. So long as the indemnifying party is
contesting any such action in good faith, the indemnified person shall not pay
or settle any such action or suit. Notwithstanding the foregoing, the
indemnified person shall have the right to pay or settle any such action or
suit, provided that in such event the indemnified person shall waive any right
to indemnity therefor from the indemnifying party and no amount in respect
therefor shall be claimed as Damages under this Article IX.
SECTION 9.05. ENVIRONMENTAL MATTERS. Seller shall, at its sole
expense and in the manner reasonably determined by Seller, conduct or direct any
environmental clean-up or remediation which is required by law after the date of
Closing for which Seller is responsible under this Agreement; provided, however,
Seller will provide Buyer with a complete copy of any governmental filing or
submission at the time it is made. Buyer agrees to cooperate with Seller in
connection with any such clean-up or remediation including, without limitation,
making relevant personnel and records available to Seller at all reasonable
times at a reasonable charge to be agreed upon between Buyer and Seller.
SECTION 9.06. COOPERATION. If requested by the indemnifying
party, the indemnified person shall cooperate with the indemnifying party and
its counsel in contesting any claim which the indemnifying party elects to
contest or, if appropriate, in making any counterclaim against the person
asserting the claim or any cross-complaint against any person and further agrees
to take such other action as reasonably may be requested by an indemnifying
party to reduce or eliminate any loss or expense for which the indemnifying
party would have responsibility, but the indemnifying party will reimburse the
indemnified person for any expenses incurred by it in so cooperating or acting
at the request of the indemnifying party.
31
32
SECTION 9.07. LIMITATION. Notwithstanding anything to the
contrary, Seller or its Shareholders shall have no liability to Buyer's
Indemnified Persons for indemnification under this Article IX unless and until
the aggregate amount of Damages exceeds ONE HUNDRED THOUSAND DOLLARS ($100,000).
In the event that the aggregate Damages exceed the ONE HUNDRED THOUSAND DOLLAR
($100,000) threshold, Seller shall have liability for indemnification under this
Article IX for Damages. A certain warranty issue was disclosed to Buyer prior to
Closing, and Seller has given a credit to a customer for THIRTY-FIVE THOUSAND
DOLLARS ($35,000). Said THIRTY-FIVE THOUSAND DOLLAR ($35,000) credit shall be
deducted from the ONE HUNDRED THOUSAND DOLLAR ($100,000) threshold. Accordingly,
as of the signing of this Agreement, THIRTY-FIVE THOUSAND DOLLARS ($35,000) in
damages have already been aggregated towards the ONE HUNDRED THOUSAND DOLLAR
($100,000) threshold. However, Seller's liability for indemnification under
Article IX for Damages shall not exceed EIGHT HUNDRED THOUSAND DOLLARS NO CENTS
($800,000). No claim or cause of action or asserted liability for
indemnification under this Article IX shall be valid if made after two (2)
years. Failure to institute a claim or cause of action within such period will
constitute an absolute bar to the institution of any proceedings or actions
based upon, and will constitute a waiver of, all the claims and/or causes of
action not so asserted.
Further, Seller has agreed, pursuant to the Escrow Agreement and Section 7.07 of
this Agreement, to escrow TWO HUNDRED THOUSAND DOLLARS ($200,000) of any Cash
Purchase Price referenced in Section 2.01(a)(i) or (ii) into an interest-bearing
escrow account for possible indemnification pursuant to Article IX of this
Agreement.
SECTION 9.08. PAYMENT OF DAMAGES. The indemnifying party shall
promptly pay to the indemnified person in immediately available funds the amount
of any Damages to which the indemnified person is entitled by reason of the
provisions of this Agreement. The parties covenant that any payment made
pursuant to this Article IX will be treated by the parties on their respective
tax returns as an adjustment to the Purchase Price.
ARTICLE X
MISCELLANEOUS PROVISIONS
SECTION 10.01. EXPENSES. Each of the parties shall pay all costs
and expenses incurred by it in negotiating and preparing this Agreement and in
Closing and carrying out the transactions contemplated by this Agreement. In
addition, Seller shall pay all costs and expenses incurred by the Purchased
Business in connection with carrying out the transactions contemplated by this
Agreement.
SECTION 10.02. HEADINGS. The subject headings of the Articles and
Sections of this Agreement are included for purposes of convenience only and
shall not affect the construction or interpretation of any of its provisions.
SECTION 10.03. ENTIRE AGREEMENT. This Agreement, including
preamble, recitals, and articles, as well as the Disclosure Schedules referred
to in this Agreement which form a part of this Agreement, and the instruments
and documents to be delivered by the parties
32
33
pursuant to the provisions of this Agreement, contain the entire understanding
of the parties with respect to the transactions contemplated by this Agreement.
There are no representations, warranties, covenants or undertakings other than
those expressly set forth or provided for in this Agreement and such other
instruments and documents. This Agreement supersedes all agreements and
understandings between the parties with respect to the transactions contemplated
by this Agreement.
SECTION 10.04. MODIFICATION AND WAIVER. No supplement,
modification or amendment of this Agreement shall be binding unless executed in
writing by all the parties. The party for whose benefit a warranty,
representation, covenant or condition is intended may in writing waive any
inaccuracies in the warranties and representations contained in this Agreement
or waive compliance with any of the covenants or conditions contained in this
Agreement and so waive performance of any of the obligations of the other party
to this Agreement and any defaults under this Agreement; provided, however, that
such waiver shall not affect or impair the waiving party's rights with respect
to any other warranty, representation or covenant or any default under this
Agreement, nor shall any waiver constitute a continuing waiver.
SECTION 10.05. COUNTERPARTS. This Agreement may be executed
simultaneously in one or more counterparts, each of which shall be deemed an
original, but all of which together shall constitute one and the same
instrument. This Agreement may also be executed by facsimile signatures, each of
which shall be deemed an original.
SECTION 10.06. DISCLOSURE SCHEDULES. All Disclosure Schedules
attached to this Agreement are incorporated in this Agreement and made a part of
this Agreement in the same manner as if such schedules were set forth at length
in the text of this Agreement.
SECTION 10.07. SUCCESSORS AND ASSIGNS. This Agreement shall be
binding upon, and shall inure to the benefit of, the parties and their
respective successors and assigns; provided, however, (a) neither this Agreement
nor any of the obligations under this Agreement may be assigned by Seller
without the prior written consent of Buyer and (b) Buyer may assign its rights
under this Agreement to lenders of the Buyer or the Purchased Business for
collateral security purposes. No such assignment shall relieve Buyer of any of
its obligations under this Agreement.
SECTION 10.08. NATURE AND SURVIVAL OF REPRESENTATIONS AND
WARRANTIES. All representations and warranties made by any party to this
Agreement or pursuant to this Agreement and the indemnification rights and
obligations with respect thereto set forth in Article IX of this Agreement shall
survive the Closing Date for a period of four (4) years, at which time such
representations, warranties and indemnification rights and obligations with
respect thereto shall expire; provided, however, notwithstanding the foregoing,
(a) the rights and obligations with respect to indemnification as provided in
Article IX shall continue with respect to any matter for which indemnification
had been properly sought in writing prior to the expiration of such survival
period, (b) all representations and warranties as to the title of the Purchased
Business and the Purchased Assets set forth in Section 4.17 of this Agreement
and the indemnification rights and obligations with respect thereto shall
survive without any expiration and (c) all representations and warranties as to
environmental matters set forth in Section 4.18 of this Agreement and the
indemnification rights and obligations with respect
33
34
thereto set forth in Article IX of this Agreement shall survive the Closing Date
for a period of seven (7) years.
SECTION 10.09. NOTICES. All notices, requests, demands and other
communications to be given under this Agreement shall be in writing and shall be
deemed given (a) on the date of service if served personally on the party to
whom notice is to be given, (b) on the date of receipt if delivered by telecopy
or nationally recognized overnight courier or (c) on the third (3rd) business
day after deposit in the U.S. mail if mailed to the party to whom notice is to
be given by certified or registered mail, return receipt required, postage
prepaid and properly addressed as follows:
If to Buyer: Modern Window Acquisition Corporation
000 Xxxxxxxx-Xxxxxxxx Xxxx
Xxxxxxxxxxx Executive Center
Building "G" Xxxx
Xxxxxxxx, Xxxx 00000
Attn: Xxxxx X. Xxxxxx, President
Telecopy No.: (000) 000-0000
with a copy to: Modern Window Acquisition Corporation
000 Xxxxx Xxxx, Xxxx, Xx. 000
Xxxxxxxxx, Xxxx 00000
Attn: Xxxxx X. Xxxxxxxx, Esq., Counsel
Telecopy No.: (000) 000-0000
if to Seller: Modern Window Corporation
Xxxxxx X. Xxxxx
0000 Xxxxxxxxxx Xxxxx
Xxxxxxxxxx Xxxxx, XX 00000
Modern Window Corporation
Xxxxxx Xxxxxx
0000 Xxxxxxxxxxx Xxxxx
Xxxxxxxxxx Xxxxx, XX 00000
SECTION 10.10. GENDER. Any reference to the masculine, feminine
or neuter gender shall be deemed to include each other gender unless the context
otherwise requires.
SECTION 10.11. KNOWLEDGE OF SELLER AND THE PURCHASED BUSINESS. As
used in this Agreement, the phrase "to the knowledge of Seller and the Purchased
Business" or phrases of like import shall mean and be construed as the
collective knowledge of Seller and the officers of the Purchased Business
identified on Schedule 10.11 of the Disclosure Schedules.
34
35
SECTION 10.12. GOVERNING LAW; DISPUTE RESOLUTION.
(a) This Agreement and all transactions contemplated by
this Agreement shall be governed by, construed and enforced in
accordance with the laws of the State of Ohio without giving
effect to the principles of conflicts of laws thereof.
(b) Any controversy, dispute or claim arising out of or
relating to this Agreement, including Article IX and questions
concerning the scope and applicability of this Section 10.12,
shall be settled by arbitration in Cuyahoga County, Ohio, in
accordance with the rules of commercial arbitration then followed
by the American Arbitration Association or any successor to the
functions thereof, except as set forth in Section 10.12(c). This
agreement to arbitrate shall be specifically enforceable against
each of the parties.
(c) When a matter has been submitted for arbitration,
within thirty (30) days of such submission, Buyer will choose an
arbitrator and Seller will choose an arbitrator, and an
additional arbitrator independent of the parties will be selected
unanimously by the two arbitrators chosen by the parties. The
dispute shall then be resolved by majority vote of the three
arbitrators. If the arbitrator chosen by Buyer and the arbitrator
chosen by Seller cannot agree upon a third independent arbitrator
within thirty (30) days of their appointment, the independent
third arbitrator will be selected according to the procedures of
the American Arbitration Association or any successor to the
function thereof.
(d) The parties hereto agree that an action to compel
arbitration pursuant to this Agreement may be brought in any
court of competent jurisdiction. Application may also be made to
any such court for confirmation of any decision or award of the
arbitrators, for an order of enforcement and for other remedies
which may be necessary to effectuate such decision or award. The
parties hereto hereby consent to the jurisdiction of the
arbitrators and of such court and waive any objection to the
jurisdiction of such arbitrator and court.
(e) One or more of the parties to any arbitration
proceeding commenced hereunder shall be entitled as a part of the
arbitration award to the costs and expenses (including reasonable
attorneys' fees and interest on any award) of investigating,
preparing and pursuing an arbitration claim as such costs and
expenses are awarded by the arbitration panel.
SECTION 10.13. SEVERABILITY. In the event that any of the
provisions of this Agreement are determined to be unenforceable by any court of
competent jurisdiction, the parties to this Agreement shall consider such
provisions amended and modified so as to eliminate such invalidity or
unenforceability and all other provisions shall remain in full force or effect
as originally written.
35
36
SECTION 10.14. CONFIDENTIAL NATURE OF INFORMATION. Each party
shall treat in confidence all documents, materials, and other information which
it shall have obtained regarding the other party during the course of the
negotiations leading to the consummation of the transactions contemplated by
this Agreement (whether obtained before or after the date of this Agreement) and
the preparation of this Agreement and other related documents. The obligation of
each party to treat such documents, materials and other information in
confidence shall not apply to any information which (a) such party can
demonstrate was already lawfully in its possession prior to the disclosure
thereof by the other party, (b) is known to the public and did not become so
known through any violation of a legal obligation, (c) became known to the
public through no fault of such party, (d) is later lawfully acquired by such
party from other sources, (e) is required to be disclosed under the provisions
of any Federal, state or local statute or regulation issued by a duly authorized
agency, board or commission thereof or (f) is required to be disclosed by a rule
or order of any court of competent jurisdiction. Each party agrees, if it
breaches any of the terms of this Section 10.14, it will consent to the issuance
of a temporary and/or permanent injunction by any court of competent
jurisdiction enjoining such party from continuing to breach the terms of this
Section 10.14. Notwithstanding the provisions of this Section, Buyer shall have
the right to disclose any information as it deems necessary in conjunction with
obtaining financing for the transactions contemplated in this Agreement or an
offer of securities of AAPC, including, without limitation, a description of the
Seller's business and products, an inclusion of financial statements, and other
financial information regarding the Seller, or the Purchased Business.
36
37
Signature Page to Agreement
IN WITNESS WHEREOF, each of the parties to the Agreement has
executed this Agreement this 10th day of December 1997.
MODERN WINDOW CORPORATION
By: /s/ Xxxxxx X. Xxxxx
------------------------------
Xxxxxx X. Xxxxx
Its: Chairman
Seller
SHAREHOLDERS
By: /s/ Xxxxxx X. Xxxxxx
------------------------------
Xxxxxx X. Xxxxxx
By: /s/ Xxxxxx X. Xxxxx
------------------------------
Xxxxxx X. Xxxxx
By: /s/ Xxxxxxx X. Xxxxx
------------------------------
Xxxxxxx X. Xxxxx
MODERN WINDOW ACQUISITION
CORPORATION
By: /s/ Xxxxx X. Xxxxxx
------------------------------
Xxxxx X. Xxxxxx, President
Buyer
37
38
The following schedules to the Agreement have been omitted from this
Exhibit 2.5. The Company agrees to furnish supplementally a copy of any omitted
schedule to the Securities ad Exchange Commission upon request.
Schedule 1.01 Voting securities or equity interests in other
entities
Schedule 1.01(o) Interest in Team Pros America Corporation stock
Schedule 1.03(a) Current Liabilities
Schedule 1.03(c) Doyco, Inc. Pension Plan demand note
Schedule 1.03(d) American Architectural Products Corporation working
capital loan
Schedule 1.03(f) Loan payoff letter
Schedule 4.02(a) Authority of Seller
Schedule 4.02(b) No Violations
Schedule 4.02(c) Third-Party Consents
Schedule 4.03 Tax Matters
Schedule 4.06 Leased Personal Property
Schedule 4.07 Financial Statements
Schedule 4.08 Inventories
Schedule 4.10(a) Material Contracts
Schedule 4.10(b) Prepayments or Defaults
Schedule 4.10(c) Indentures, Mortgages, et al.
Schedule 4.10(d) Full Performance of Prior Contracts
Schedule 4.11 Accounts and Notes Receivable
Schedule 4.12 Certain Transactions; Adverse Change
Schedule 4.13 Significant Customers and Significant Suppliers
Schedule 4.14 Warranties
Schedule 4.15 Licenses and Permits
Schedule 4.16 Intellectual Property
Schedule 4.17 Title to and Condition of Assets
Schedule 4.18 Environmental Matters
Schedule 4.19(a) Employee Benefit Plans
Schedule 4.19(b) Claims under Employee Benefit Plans
Schedule 4.19(c) Pension Plan or Withdrawal Liability
Schedule 4.19(d) Representatives with respect to Employee Benefit
Plans
Schedule 4.20(a) Litigation
Schedule 4.20(b) Warranty and Product Liability Claims
Schedule 4.20(c) Worker's Compensation Claims
Schedule 4.21(a) Employees
Schedule 4.21(b) Employment and Consulting Agreements
Schedule 4.21(c) Consultants and Independent Contractors
Schedule 4.22 Insurance Policies
